Roadmunk Revenue & Funding (2018)

hello everyone my guest today is latif nanji he's the co-founder and ceo of a company called road monk a product road mapping platform that enables clients like coca-cola citibank mastercard and adobe to visualize and collaborate on strategic plans all right latif are you ready to take us to the top absolutely all right so this is like i mean is this like you know trello or base camp for the enterprise uh in a sense uh yes but really what we actually do is we think of ourselves as the mezzanine layer above those tools in a lot of cases tactical teams need to still stay in the trellos and jiras and asanas of the worlds and we're not there to compete with them we look at ourselves as a way to make it easy to visualize and manage and create plans that executive stakeholders or stakeholders that are not used to working in those day-to-day tools really need some level of visibility into interesting okay very good and give me a sense of you know we obviously know the monthly kind of averages in terms of price points for those tools on your tool what's the average company paying per year would you say yeah so we have sort of three different segments uh but on average across you know sort of the mainstream of customers you're looking around four thousand dollars per year okay good okay so so not not super enterprise but you know bigger than smb i would say yeah so we do have a whole segment of customers that are a mid-market and enterprise that do pay in the more traditional numbers which would be somewhere between 25 to 100k just depending on if they use uh take advantage of some of our security features so we do offer uh virtual private clouds for the enterprise as well as just larger seat volumes which come in at platform pricing that's interesting so are those your two main leverage points in terms of your pricing axes to drive expansion revenue uh yes as we also have a per seat model as well which is more traditional and we use that and on top of the enterprise they have other requests that we've enabled us to grow our business and expansion beyond the traditional per seat pricing interesting so seats security features and some other product features exactly interesting okay put all this on the timeline when do you launch company 2013 is when we started and founded the company in january okay and then we launched into market at the end of 2014. so we've been in market for about four years now that's great and what have you scaled to in terms of total customers yeah so we've got uh without like getting directly but we're within two within two thousand to three thousand customers right okay in that range fairly healthy yeah so i mean look uh you know taking the 2000 we'll go on the minimum since you gave a range if you do 2 000 times that 4 000 price point i mean what does that put you out if i do the division 600 grand a month something like that is that right we're about there yeah yeah that's great that's great a little above or a little below above above when um what has the growth rate been like over the past 12 months where we had a year ago uh yeah so we've been 2016 was the triple and then we've been constantly doubling each year since then that's pretty okay so if you're north of 600 today in terms of monthly revenue you know you're about what three 300 grand about a year ago uh yes i think a little bit less than that but around there okay interesting and what's driven most the growth over the past 12 months is it expansion across the you know the old cohort or is it new customers yeah it's about 60 40 split between new and expansion we're seeing really healthy expansion simply because of the viral the viral nature of the software i think a lot of tools that are product led growth just like we are have found ways within the tool to do the land and expand models so we start with a few seats make a few champions really successful and then from there we see other product managers who are our target primary audience for this tool then go and talk since they have a lot of influence within the organization whether it's on the executive branch or towards other um you know cross-functional teams that work and need visibility into what's going on in the plan so how effective has that been what is your expansion on a cohort from 12 months ago typically yeah so while on a cohort basis it's different varying month by month but if we look at sort of averages it's around at least 40 percent of you know our monthly uh net revenue our net new mrr is going to be from expansion okay let me repeat that back to make sure i get 40 of your net of revenue you add in a given month is going to be from expansion revenue yeah so let's say in a month you add 50 kmrr 20 of that would be from got it but but i'm curious on a cohort basis because this gets into churn like what's your revenue churn per year yeah so we don't necessarily disclose those numbers uh for now just because it's a bit of a competitive space we don't want to get to that but we're i would say we're around we're slightly below average i think we're doing pretty healthy um so i would say it's somewhere between on a gross basis between two and three okay that's not and that's monthly or annually yeah it's on an annual basis it's two percent oh sorry monthly basis around two two and a half percent got it two for so called 24 revenue churn per year it sounds like you have healthy expansion though are you above 100 in terms of net revenue retention absolutely we have net negative churn that's great yeah it's always it's always fascinating to me too like people use those those are basically this you consider those the same thing right net negative revenue churn and net revenue expansion being above 100 yes absolutely yeah it's it's just interesting some people choose to like i guess think about it positively so they talk about retention others think about it negatively so they think about churn it's just a mindset thing it is so thank you for talking to investors they love talking about retention they're less worried about this net negative thing they want to understand retention on a cohort basis understanding which codes are mature if they've been you know gone through a full annual cycle if you know you're billing in that manner so there's all those dynamics net negative churn is probably something founders sometimes tend towards but it just depends on you know who's the audience and what kind of person is looking at that just funny to me it's because it's basically you know revenue or sorry churn plus like retention right like they equal 100 no matter which way you cut the dice it's just which side you want to focus on okay good so healthy healthy expansion there and then walk me through i mean you launch in 2013 it sounds like you really kick things into year 2014 first hundred customers where'd they come from you know what nathan we had no idea where they were gonna come from we just put up a a website we had a product and we connected our stripe uh you know the stripe api within the first 90 days we had 50 customers i remember on december 31 2014 at like we wanted to get from 49 to 50 and we called a couple people that were in trial we'll sell them we'll give them a heavy discount just so that optically we could when we were starting to raise capital we just showed them that we got 50 customers in 90 days so it really just came simply by seo and marketing that was the channel we had we had written some content we hadn't obviously done a full throttle because it had been only just uh 90 days but we had i would say on average at the time probably about 10 to 15 signups a day so very modest compared to where we are today and then from there we were able to do some pretty great conversion because tools on the market were still um very early on in this particular space interesting so okay so first 50 customers came mainly from seo and content um what is the team today and how many folks are are you know focused on seo content sales marketing yeah so we have 66 people today at roadmonk and our sales and cs team is about i'd say 14 but mostly cs predominantly we have only two sales people and then in the marketing side we have about 10 people interesting curious question here do your cs people carry any kind of quota they do have targets in which they have to hit and they're not comp they're they're not competent in the traditional sense like you need to do you know 100 000 in expansion over the quarter or something of that nature we actually do it based on the quick ratio so we look at both um expansion contraction churn and new if they're closing any deals usually they're able to do any transactional deals so deals that are likely smaller than five thousand dollars um and then from there our sales team would take over if they're larger deals and have to go a traditional through a traditional procurement process so so how i'm cure i want to dive into that how do you set because i'm seeing the cs role really the companies that have healthy expansion have really smart cs teams and i'm trying to understand how ceos like yourself are motivating these cs folks because these aren't people you're just hiring off the street and these are very talented people right so when you say you motivate them that like there is a target but it's not it's not a quota carrying role like what what does that target actually sound like yeah so for example um so they have a portfolio of customers so we have to start there they they own a segment of let's say somewhere between two to four hundred customers depending on the tenure of that particular cs rep the experience and the relationship the relationships they've built with customers um so they own that and what they have they're responsible for on a month-to-month basis is both the expansion and contraction so it's a ratio so basically let's say you know in the quick ratio world you want to be aiming for for every four dollars you bring in um you don't want to be losing more than a dollar that's sort of like the sweet spot so let's say for example they're comped on that and they get x amount of dollars each month or quarter if they shoot over let's call it 4.25 but if they get between 3.75 and five there then comes another dollar amount um so this has been working sort of early on in the business but as we continue to grow we're looking at new models that are not just focused on both expansion and contraction or churn it's also like saying here is the expansion business as a dollar amount that we want you to focus on so we're seeing we're starting to experiment that transition um but we haven't fully gone over to that side just yet interesting so let me role play with you for a second uh you i'm i'm a cs you know person at road monk we're having our one-on-one and my number is not four in one out it's like four in three out and you're going nathan what happened i'm saying latif this sales guy like close this huge hundred thousand dollar acv deal and promised all these things that we can't actually deliver on like i had no chance they churned and that's why it's three bucks out instead of one dollar out that's why i missed my target that's why i'm not hitting my comp i'm leaving sorry i didn't hit my car you know i need to make more than this per month how do you handle the you know i'm being a little facetious but you get my point absolutely so uh thankfully that's never happened here and the reason that hasn't happened is because our two sales reps have been really highly educated on our product we don't oversell we've made sure that when we look at an rfp or requirements that we match those requirements and if anything does need to be delivered that's on roadmap um we are really aligned with the product teams so we'll go back to our director product and say this deal is contingent on x which rarely happens we try to make sure we sell what we have today i think that's a really important piece of i wouldn't want to say feedback or advice but i think something that we embraced internally because we wanted to avoid signing a 100k contract and then having exactly this scenario so for example when we signed one of the largest companies in the world onto the platform we said we need to deliver this in you know six months so we said to the customer that we're going to take a year to deliver this here are the milestones and we made sure to hit all of them but we make sure we don't set up cs for being unsuccessful by trying to oversell because we don't have a hardcore sales culture here we only have two reps we have you know nearly obviously a significant number of customers in the thousands so for us we've been really cognizant of keeping uh true of our values in that sense yeah that's interesting so so what just be clear that the metrics that you have set with your cs people is it four and one out is that the target they all have yeah it's roughly around there there's there's some it should be simple and clean it's around there yet okay and if they hit that there's a it's not necessarily like a percentage of like expansion revenue basis but there's like a monetary reward each quarter for hitting that goal yeah it's x amount of dollars interesting and it's the same no matter what the cs rep is or is if they're more advanced they'll get higher or if they're more junior they'll get lower that's correct yeah so there is people that are more tenured and more experienced and so it's a base it's also based on negotiation of comp at the beginning of the year but we do have rough bands so it's not like someone's getting triple or something like that they're all very roughly within the same ballpark and generally uh more tenured cs folks are getting the larger acv accounts um no actually i think no we like to actually spit it amongst them and especially if there's somebody we don't actually have too many juniors on the team but if we do hire someone junior or for the ones that are kind of moving on towards intermediate we do actually give them a big account we just make sure to walk them through them because they need the opportunity to learn as well and so before we hand them that account we actually go through an education process of handing them off we teach them about managing champions relationship building understanding how to navigate that type of organization so we do give them the tools and the education so that they can move their career forward that isn't and so you know we have tier one two and three customers tier one being the largest and so we try to distribute that evenly across our cs reps and so that's not just all the big accounts owned by one person or a couple or a handful of people um there are some key accounts that do involve multiple cs reps simply because of the size of those organizations and the number of seats they have today that's interesting thanks for sharing all that it's fascinating to kind of understand how individuals are motivated and how then they fit in with the whole part of the team and how you make sure the team is are helping other team members as well so that that's helpful understand 66 people where they spread out from or between so we have two we're co-located i wouldn't call us fully remote we have two offices one in waterloo which is where i went to school and kind of built out my chops as a founder and a product manager and so that was a great environment for developers because of the university of waterloo being an engineering school and then our operations team is in toronto and then we have a couple people across london new york and san francisco okay so waterloo toronto and some other remote spots last question here on economics um how aggressive are you being in terms of payback period are willing to wait up to a year to get paid back or what yeah i think our payback period is around 14 months if you roll in everything if you kind of you know the calculation can get a little bit skewed depending on what you add in but yeah we're happy to wait back for a year i think the way we look at it is creation of value to the user is number one time to value making sure that they get that value and hit the north star within you know 60 to 90 days and then if you do that then you know you're gonna have the ltv at a higher rate and over time that payback period is going to be reduced yeah you said earlier your your kind of average acv starting is about four grand so you're willing to spend call it 40 to 4300 bucks to acquire that customer uh fully that's all that's worst case fully weighted case yes that's great and uh bootstrapped have you guys raised uh we've raised a little bit so we raised two and a half million us um and we are been really this is a couple of things on the economic side number one we're in canada so we just get that thirty percent exchange rate number two is yeah we collect the majority of our contracts call it just 80 20 rule annually so if you were in the valley and you instead of collecting 80 20 you were collecting 50 50 annual and monthly i ran the numbers we would have had to have raised two years ago just over 10 million dollars right so just the dynamics of those two levers alone completely changed the way we can increase our valuation allow the founders and the team to be more focused in on the business operationally and not have to worry about doing an early series a but doing a later a or b when we choose such that we can inflect growth and so there is just a couple of levers that have given us those advantages simply by our geography and the way we've collected cash yeah are you considering an additional raise today or in the near future uh i'll abstain but my smile should give it away yeah yeah well so um it sounds like you don't need it something you're building a healthy business but but why is now the right time to raise capital you just like where the economy is or the global markets or what oh okay so yeah just in a general conversation sense today is a great day to raise money there is so much dry powder out there i mean it's it's the macro environment feels very much like those days when anyone could raise money so organizations should be trying to stop their coffers if they can get a good valuation and close on reasonable terms really fast and it doesn't skew um the dynamics of the organizations i.e they don't have to grow too high up into evaluation so you know if your run your run rate is like you know two or three million and you start to raise at like 30 or 40 or something egregious you're going to have that huge challenge and then a down round on the next one so you want to make sure you avoid those dynamics but if you're running between five to 20 million and you've got those healthy things i think it's just a great time to raise the macro climate's great i don't know how long it sustains for given the current um climate so for for me just generally speaking i think it's a good time to raise so let's see if again generally and hypothetically if a company like that was around your size uh was raising i mean are you thinking i mean what if you did raise what kind of capital would you want to bring in in a traditional kind of series a series be i mean 5 10 15 less so for yeah so for us i would do more than less just simply because one we've raised so little to date so we just hold such strong metrics too i love the market we're in so i would be raising well over 10 million i would think would be the number for us uh and then yeah so 10 to 10 to 15 would seem like a really great raise we also just don't have the expenditures and burn rates that typical valley companies do just simply based on the cost of an engineer um it's it's like one and a half x less or at least 2x less than it is in the valley and also the loyalty in canadians market the canadian market is just really high because people's reputations are really big here because the communities are just so small even though the city is big yep are you casual positive or basically break even today yes that's great so you have all the leverage that's wonderful all right let's wrap up here with the famous five number one what's your favorite business book oh wow i wrote this down oh god it would be losing my virginity by richard branson number two is there a ceo you're following or studying i just gave it away richard branson he's definitely someone whose lifestyle i admire that's great number three what's your favorite online tool for building your business beside your own wow that's a good question um why besides roadmunk i would say i thought it was just a favorite online tool so favorite online tool for building my business what's your favorite online tool that's fine okay well i'm a big fan of goodreads and pocket they keep all of the knowledge centralized for me that i need to so when i need to go pick up a book or read an article it's at my fingertips number four how many hours of sleep you're getting every night minimum eight and i don't have an alarm i love it that's great i love hearing you just like own that so many people are like oh i wonder if it's like a weakness or my investors are going to hear this and think i'm not working hard but you know give you against bill gates where bill gates gets no sleep for 48 hours and you get like 16 hours i think you beat bill gates every time 100 and it's crazy like if you think about human history like hundred thousand years ago or even 50 20 000 years ago there was no clocks there was no alarm clock you just woke up on your own circadian rhythm and why should we just have this jarring thing wake us up it's crazy it is crazy all right uh and what's your situation married single kiddos single sing no kids oh and how would i get nephew nephews denise is 34. that's good all right last question what do you wish your 20 year old self knew i would say that building a higher degree of empathy and emotional intelligence will build better human connections than just using raw intelligence and being trying to be smart guys there you have it start building your eq emotional intelligence as early as you can uh foundative founded red monk in 2013 uh now skilled over two thousand paying customers uh on just 2.5 million bucks raised which i love they've passed about uh 600 grand per month in revenue that's up doubled year over year so about 300 grand a month just back in october of 2017. 24 gross revenue churn annually but expansion more than covers that so net revenue retention annually well over a hundred percent willing to spend up to 14 months of lifetime value on acquisition in the worst case scenario they're well below that on probably most their sign ups but healthy economics they've got a team of 66 folks between waterloo toronto and other locations latif thanks for taking us to the top thanks nathan